- Gold prices rose at the start of the trading week by 0.7% at $2,445.06 an ounce, remaining near record levels amid rising military tensions in the Middle East and expectations of a Federal Reserve rate cut in September.
- Further gains in the yellow metal are constrained by expectations of key U.S. inflation data this week. The data is anticipated to show a slight cooling in inflation for July, giving the Federal Reserve a stronger justification to begin cutting interest rates.
- The yellow metal experienced significant volatility last week amid increased fluctuations in broader financial markets but ended the week with a slight increase. It also benefited from safe-haven demand amid concerns over escalating military conflict in the Middle East and Ukraine's offensive against Russia.
- Traders prefer to wait for the release of the latest U.S. inflation data this week – the Producer Price Index (PPI) and the Consumer Price Index (CPI) on Tuesday and Wednesday, respectively. Therefore, it would be prudent to wait before making a buying decision, hoping for a breakthrough in record levels for the yellow metal.
- The U.S. is enhancing its capabilities in the Middle East by sending an additional guided missile submarine to the region amid escalating regional tensions.
- Traders are divided between a 25 or 50 basis point cut by the central bank in September. Lower interest rates are a positive indicator for gold, as they reduce the opportunity cost of investing in the non-yielding yellow metal.
- Traders see a 100% chance of a 25 basis point rate cut at the September policy meeting and a slightly lower chance of a larger 50 basis point cut.
- Federal Reserve Governor "Michelle Bowman" stated that the central bank may not be ready to cut rates in September due to upside risks for inflation and continued strength in the labor market. However, this has yet to help the U.S. dollar attract significant buyers or provide any impetus for the non-yielding yellow metal at the start of a new trading week.
- Gold prices need to surpass the $2,448-2,450 zone to confirm bullish momentum in the market, paving the way toward re-testing the historical all-time high (ATH) near the $2,483-2,485 zone reached in July. This is followed by the psychological $2,500 level, which, if cleared, could open the door for further near-term upward movement.
- Alternative scenario: ?breaking the horizontal resistance at $2,410 could open the path for further declines to $2,390, then $2,380. Any additional decline may test the strong support level at $2,373, a key pivot point, below which gold prices could slide to the late July low at $2,318.55.
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